Audit (A-07-08-02721)

05-20-2010
Audit of the Indian Health Service Fiscal Year 2005 Cost Statement for the Navajo Area Office

Executive Summary

Our audit of the Indian Health Service’s (IHS) FY 2005 cost statement for the Navajo Area Office found that $2.5 million of the $29 million of obligations that was reported and that we reviewed was unallowable. The cost statement also included $4.8 million for unsupported salaries, fringe benefits, and related obligations on which we could not express an opinion. The Social Security Act authorizes Medicare reimbursement to IHS providers. IHS Headquarters and area-office cost statements identify the portion of obligations from Headquarters and the area offices that is allowable under Medicare and allocable to IHS providers. Allowable Headquarters obligations are allocated to each area office.

We recommended that IHS (1) adjust its next cost statement for the Navajo area office for $2.5 million of unallowable costs; (2) review the Navajo area office’s cost statements before and after FY 2005 and adjust its next cost statement for duplicated costs caused by contractor errors and for unallowable depreciation; (3) strengthen its policies and procedures to ensure that depreciation is not reported for items that are fully depreciated; (4) work with CMS to determine how much of the $4.8 million for salaries, fringe benefits, and related obligations reported in the Navajo area office’s FY 2005 cost statement was allowable and adjust its next cost statement for obligations that are determined to be unallowable; and (5) develop and implement policies and procedures to ensure that estimates used to allocate obligations in cost statements are supported with cost information that is current, accurate, and in sufficient detail.

IHS concurred with all of our recommendations and described corrective actions that it planned to implement.